Moaaz Manzoor

The government is reviewing competitiveness support measures for Pakistan’s rice sector as widening viability gaps and sustained pressure in international markets weigh on exporters, according to official documents available with Wealth Pakistan.

Under the proposal, the authorities are considering payment of Duty and Taxes Remission for Exports (DLTL) at 9% for basmati rice and 3% for non-basmati rice. The support is based on projected exports of 600,000 metric tonnes (MT) of basmati at US$1,275 per MT and 3.5 million MT of non-basmati at US$360 per MT, bringing the total projected export value to US$2.025 billion.

The estimated cost of the proposed support stands at US$107 million, equivalent to around Rs30 billion. Of this amount, US$69 million (approximately Rs19 billion) would be allocated to basmati exports, while US$38 million (around Rs11 billion) would support non-basmati shipments.

Official documents show that the non-basmati segment is facing a viability gap of US$20 per MT, while the basmati segment is confronting a significantly higher gap of US$120 per MT. This comes even though Pakistan continues to command a price premium of US$100–150 per MT over Indian basmati in global markets. During the period from 11 to 21 January 2026, basmati prices were recorded at US$1,000 per MT for India and US$1,275 per MT for Pakistan.

The Ministry of Commerce, through a notification dated February 9, 2026, later modified on February 18, partially amended its earlier notification of January 23, 2026. The revised Clause 1(3)(a) specifies that the FOB value of exported rice must be at least US$750 per MT and not exceed US$1,275 per MT. It further clarifies that any FOB value above US$1,275 per MT will not be considered for determining and paying duty drawback. The modification has been deemed effective from January 23, 2026.

Global supply conditions have further intensified pricing pressures. According to USDA data, rice production in crop year 2025-26 is estimated at around 550 million tonnes, reflecting a 1% increase over the previous year. India’s output, projected at about 150 million tonnes for CY2025-26, combined with substantial carryover stocks, has contributed to a supply glut in international markets.

As a result, non-basmati rice prices have declined by 20–22% from US$440–450 per tonne in January 2025 to US$350–360 per tonne in January 2026, with additional downward pressure anticipated.

The documents also highlight structural competitiveness challenges. In the non-basmati segment, exporters are grappling with India-driven supply expansion and the diversion of head rice to the feed industry. In the basmati category, high domestic procurement prices, stockist activity, informal exports to Iran, and misdeclaration through land routes have been identified as key concerns.

Cross-cutting issues include a higher tax burden following the transition from the Final Tax Regime (FTR) to the Normal Tax Regime (NTR), profit margins compressed to 3.0–3.5%, and liquidity constraints due to delays in sales tax refunds, further straining the sector’s export viability.

Credit: INP-WealthPk